MEDPARTNERS: Debt Settlement at Stand-Still
Progress on the deal between MedPartners Inc. and the scores of physicians and hospitals to which it is indebted "stalled two months ago," presenting Gov. Gray Davis with a potentially embarrassing situation, the Los Angeles Times reports. The $240 million settlement Davis has championed as "sign of his savvy and mettle" in dealing with the health care industry ran into a major hurdle when Medpartners, now known as Caremark Rx, stopped making payments on its debts to hospital and doctors. They have failed to pay an estimated $60 million in back claims since the beginning of August, and many officials are pessimistic that the deal will be completed. Sources familiar with the situation blame the stalemate on the haste with which the deal was made, leaving "sticky legal and financial issues" to be resolved at a later date. According to its June quarterly report, Caremark Rx had only $8.6 million in cash, a two-thirds decrease from the $23.1 million it had six months prior. Caremark has indicated that it has not released the payments since the deal has not been finalized, but doctors and hospitals have said they won't sign the deal until they have received some of the money they are owed. Contributing to the standoff is a provision in the settlement that, once signed, prohibits doctors and hospitals from suing the company to recoup their losses -- a right they are loath to give up until they have received some payments. At the urging of Donna Campbell, deputy secretary of the state Business, Transportation, and Housing Agency, Caremark has offered to pay $7 million toward some of the oldest claims against it. However, by signing their checks, doctors and hospitals automatically agree to the deal and forfeit their right to sue. Elisabeth Kennedy, administrator for a Los Angeles oncology firm that is owed $150,000, said, "I would never in a million years cash that check." The California Medical Association, weighing in on the issue, is calling for the settlement to be completed. They view the deal as the only way doctors and hospitals can be assured that Caremark will repay 100% of its debts. Jack Lewin, CMA's executive vice president, said that physicians are better off signing onto the settlement to avoid receiving a smaller bankruptcy claim. Elizabeth McNeil, head of medical policy and economics for the CMA, said if the situation is not resolved in the next few days, "the deal could blow up" (Bernstein, 10/2).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.